i wouldn't concern yourself too much about what the other settings do at this stage in your learning, you can spend ages going off in a tangent to find out why not to use something and then not get much code written(i do it all the time lol), but using the src folder is the right way to go.This is from pydev manual http://pydev.org/manual_101_project_conf2.html

The first thing to know about PyDev is that to use it to its 'full extent', you must have your python modules beneath a source folder (the source folders are the paths that are added to your PYTHONPATH).